Rent controls no answer to ‘unaffordable’ homes – David Alexander

Many Scottish nationalists look across the water to the Republic of Ireland for both spiritual and practical inspiration.

What they see is a neighbouring country with a similar-sized population, a shared language, many family ties and, like Scotland, a “history” with England but which, unlike Scotland, has chosen to break the ties with England and govern itself independently.

Understandably, Scottish nationalists tend to accentuate the positive aspects of the Irish economy and ignore those which are more negative. Now, whether people living in Ireland are better off than people in Scotland, both commercially and in terms of access to public services, is a matter for debate. However, any impartial observer would have to conclude that not everything about the Emerald Isle (or the three-quarters that is self-governing) shines brightly, including many patriotic Irishmen themselves.

Among those disaffected Irish citizens are residential landlords who, for the past five years, have looked with increasing despair at what rent controls have done to the housing market in their country.

David Alexander is the chief executive officer of DJ Alexander Scotland

Twenty years ago Ireland had more housing stock than it knew what to do with as the result of a financial crisis. Now the opposite is the case with a shortage that, on a pro rata basis, is even worse than the one on this side of the water.

Ireland is experiencing a population boom, largely – like Britain – because of immigration, including an influx of relatively well-paid foreigners via technical and pharmaceutical companies keen to take advantage of the country’s competitive rate of corporation tax. Unfortunately, as in Britain, there has not been a corresponding increase in housing stock needed to accommodate them.

So the law of supply and demand has taken force. If there is not enough rental property to meet current demand then rents inevitably go up; if there is sufficient stock to meet demand then rents will settle at a more affordable level.

However in 2017 the Irish government turned economics on its head by deciding to freeze rents and then regulate any increases. The result has been “landlord flight” which although not entirely responsible for the current shortages, has undoubtedly contributed to it. And observers fear the trend will accelerate, especially among those paying for a “buy to let” with a mortgage and facing further outlays as a result of higher interest rates.

Exemplifying how acute the situation is, last month 150 people queued to view a three-bedroom house advertised to let at 1850 euros per month in Dublin. A new apartment block in the capital could have been filled 30 times over, such was the level of demand according to the country’s largest private landlord. One estate agent said it had been forced to introduce a lottery system to viewings after receiving 1200 applications for just one property.

Despite this evidence there are still politicians at national and local level who believe rent controls are the answer to so-called “unaffordable” privately-rented accommodation in Scotland, Edinburgh and parts of Glasgow in particular.

The real answer, of course, is not lower rents but more rented properties, especially social housing targeted at low-earning singles, couples and families who find it difficult to compete in the private market and for whom taking on a 30- to 35-year mortgage may not be affordable or even appropriate. Some councils are making an effort by buying up existing private properties for subsidised rent but much more – in particular a whole raft of new-build – is required.

To pay for this additional housing, Scotland will need a buoyant economy and one way of boosting this is to ensure a proper supply of housing stock for those entrepreneurs (many of them transient and therefore suited to rental accommodation) who will help drive forward that economy. This will not, however, be achieved if landlords are penalised by rent controls.

Yes, there may be aspects of Irish life which could provide inspiration for Scotland but current government policy on the country’s privately-rented housing sector is certainly not one of them.

David Alexander is chief executive officer of DJ Alexander